What is a service department? Definition of Service Department A service department is usually associated with a manufacturer’s production departments. However, a service department does not produce any of the...
What is a service department? Definition of Service Department A service department is usually associated with a manufacturer’s production departments. However, a service department does not produce any of the...
What is marginal cost? Definition of Marginal Cost Marginal cost is a manufacturer’s cost to produce one more unit of product. In other words, marginal cost is the change in total costs when one additional unit is...
What is the difference between normal costing and standard costing? Definition of Normal Costing Normal costing for manufactured products consists of following: Actual cost of materials Actual cost of direct labor...
What is the difference between prime costs and conversion costs? Cost Categories of a Manufactured Product Prime costs and conversion costs pertain to the three cost categories of a manufactured product: Direct materials...
What is the break-even point? Definition of Break-even Point In accounting, the break-even point refers to the revenues necessary to cover a company’s total amount of fixed and variable expenses during a specified...
What are production costs? Definition of Production Costs In managerial accounting and cost accounting, production costs are the costs that occur in the manufacturing facilities. Production costs are also referred to as...
Is rent expense a period cost or a product cost? Definition of Rent Expense Rent expense is often a monthly amount paid by a company for use of a building. Typically, the rent is due on the first day of every month that...
What is a fixed cost? Definition of Fixed Cost A fixed cost is one that does not change in total within a reasonable range of activity. Since the fixed cost remains constant in total, the fixed cost per unit of activity...
How do we deal with a negative contribution margin ratio when calculating our break-even point? Definition of Negative Contribution Margin A negative contribution margin ratio indicates that a company’s variable costs...
What are departmental overhead rates? Definition of Departmental Overhead Rates Departmental overhead rates are used by many manufacturers to allocate (assign, apply) manufacturing overhead to the goods it produces...
How do you calculate Return on Capital Employed (ROCE)? Return on capital employed is used as a measurement of the performance of a division of a company. It assumes that the division is not responsible for its financing...
How can a manufacturer determine the precise cost of its products? A manufacturer may never be able to determine the precise cost of its individual products. The reason is that most of the manufacturing costs (other than...
What is synergy? In business the term synergy is often associated with the merger or acquisition of companies. Synergy implies that the outcomes resulting from the merger of two companies will be greater than the sum...
What are the advantages of departmentalizing manufacturing overhead costs? The departmentalizing of manufacturing overhead costs allows for better planning and control if the head of each department is held responsible...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
involves recording transactions at their cash value at the time of the transaction. Materiality Wrong. Materiality involves insignificant amounts and the accounting for those amounts. 11. Public utilities' balance...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
of Amortization of Premium on Bonds Payable Assume that a corporation issues bonds payable having a maturity value of $1,000,000 and receives a premium of $60,000. The bonds mature in 20 years and there was no accrued...
life of the cell phones could be 10 years). Also assume that the company has purchased 100 smart phones at a total cost of $120,000. The company also estimates that the phones will have no salvage value at the end of...
it owes. On August 20, the retailer files for bankruptcy protection. Supplier Company learns that the retailer owes $2 million on bank loans that are secured by liens on all of the retailer’s assets (which have a...
not address a project’s total profitability over its entire life, nor are the cash flows discounted for the time value of money. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
-on experience. Don’t be overly concerned with the starting pay since your value will come after you demonstrate your proficiency as an effective bookkeeper. Join PRO to Track Progress Mark the Question as Read...
to the condo project. Hence the drop ship allows XYZ to avoid some expensive non-value-added activities. When Premier ships the water heaters, it will bill XYZ and will send the invoice to XYZ. As a result XYZ will have...
Receivable of $120,000 and has a credit balance of $1,000 in Allowance for Doubtful Accounts. This indicates that the net realizable value of its accounts receivable is $119,000. When reviewing an aging of the accounts...
. Example of Systematic and Rational Allocation Assume that a retailer purchases new fixtures which are expected to have a useful life of 10 years with no salvage value. Therefore, if the retailer pays $120,000 for new...
of a contra asset account is Accumulated Depreciation. For instance, if a company has a plant asset such as Equipment with a debit balance of $92,000 and the account Accumulated Depreciation has a credit balance of...
produced. This is a challenging task because there may be no direct relationship. For example, the property taxes and insurance on the manufacturing buildings are based on the assets’ value and not on the number of...
amount) discounted by the market interest rate at the time of the bond sale. Example of a Bond Premium A person would buy a bond at a premium (pay more than its maturity value) because the bond’s stated interest rate...
. Examples of Cumulative Preferred Stock Assume that a corporation has issued and outstanding 10,000 shares of 6% cumulative preferred stock with a par value of $100. This means that the corporation must declare and pay...
, if gross sales are 990 and sales returns are 10, sales allowances are 5, and sales discounts 20, the net sales are 955 (990 minus 35). Here are some additional examples of net: net realizable value. The amount to be...
the amounts of a and bx. a is the estimated total amount of fixed electricity costs during the month. It is the value of y, when x is zero. If the total cost line intersects the y-axis at $1,000 then it is assumed that...
by a patent and trademark, and the demand for the product is high, customers may accept a selling price that is unusually high. In other words, the value of the product is much greater than the costs identified with the...
period. These costs are expenses because they may have expired, may have been used up, or may not have a future value that can be measured. Some authors define operating expenses as only SG&A. In other words, they...
from the bank Collecting $4,000 from a sale that was recorded one month earlier Disposing of a company vehicle and receiving cash that is equal to the vehicle’s book value Receiving $1,000 from an employee who had...
Depreciation) The amount that has not yet been depreciated (the book value of the asset) Example of Accumulated Depreciation Let’s assume that at the beginning of the current year a company’s asset account Equipment...
is associated with the Accounts Receivable There are also situations where an unwanted credit balance appears and will need attention. Here are a few examples: An error caused by posting an amount to an incorrect...
year. Examples of the Columns Often Appearing on the Statement The statement usually has the following columns into which the amounts will be sorted: Common stock issued – number of shares Common stock issued –...
Is there a difference between an expense and an expenditure? Definition of Expense An expense is reported on the income statement in the period in which the cost matches the related sales, has expired, was used up, or...
computed when evaluating potential capital expenditures. However, the payback period is considered to be flawed because it ignores the following: Cash flows occurring after the payback period Time value of money. Join...
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